Im a long term buy and hold investor. My first buy in FB was at 23.5. I've been buying into this run up. But, I've had a hard time understanding how to value FB. I've tried to look at the size of FB and the number of users. Perhaps FB can generate $10, $20 per year per user down the road.
I've decided to simplify my thesis with the following argument: "Nobody ever went broke underestimating the stupidity of the American people."
FB is going to be a $500 stock someday. Why? Because people are stupid.
thecrapon, I believe my 30+ years involved with computer design and testing proves my credentials. That is beside the point. Zukerberg developed what was needed to make him a billionaire. I call that genius. My point concerning Zukerberg concerned his lack of experience running a large enterprise. Get it? I mean this stuff is not that hard to understand.
I have notice that just about every business in asheville has a face book page. You have to even use FB to log on to the news paper. If i want to see a menu of some eatery they say to log on to their FB page. I think Yahoo asked if i wanted to log on with FB to post this? Yeah it's growing!
Users do not generate direct income for FB because they are not FB customers.
Users are FB assets.
FB derive income from advertisers. Advertisers are FB customers.
As users grow, FB assets grow.
The good thing is that FB does not pay for the assets. FB assets is organic.
The problem is not so much underestimating the stupidity of the american people but underestimating the stupidity of the world. Of the 1 billion MAU, only 189 million are in the US and Canada. That is less than 20%. At $20 per user, that is less than 3.8 billion and over half of Facebook's revenue is from the US and Canada. Most of the future growth will be in the developing world and people have a lot less money there.
I think there is potential for Facebook to grow but at $500 that would be a couple hundred billion in revenue to support that pps. Facebook is not selling oil and wont generate revenue of 1000 per user which would give them 189 billion dollars revenue with the other half coming from the rest of the world. Thats what it would take to support a market cap that would be most likely 1.5 trillion dollars or more at a pps of $500.
Good luck on your investments. I agree that people will do some pretty stupid things. People just don't have enough money to throw at FB for a pps of $500.
i agree. i believe this is going to be a behemoth. i missed out on Google . but not here. i got in at 19.21 .and i will use this one for retirement. just to many possibilities with this one. all they have to do is add the right bushiness , slow but good ones. and we have our huge growth.
Sentiment: Strong Buy